The current campaign finance system in Israel incentivizes existing parties and creates a closed club where its difficult for new parties to compete. How can the system be reformed?
Under the Party Funding Law, a party that submits a candidate list is entitled to receive a campaign advance from the State treasury. The law, enacted in 1973 after the parties found themselves unable to raise enough money directly from the public, provides existing parties with generous funding. A party with seats in the outgoing Knesset receives a sum proportional to the number of MKs it had several days after the dissolution of the Knesset: 70% of the “funding unit” for each of them (the funding unit, which was increased right before the Knesset dissolved itself, is now NIS 1.6 million; 70% of that is NIS 1.12 million).
In total the parties are automatically entitled to NIS 145 million, broken down as follows:
|National Union (Blue White & New Hope):
|Yamina/Jewish Home (for Yamina only, because Jewish Home doesn’t have any MKs):
|United Torah Judaism (Agudat Yisrael & Degel Hatorah):
|Religious Zionism (Religious Zionism & Jewish Power & Noam):
Lists that currently have fewer than 10 MKs—all of the parties except for the Likud, Yesh Atid, and the National Union—can receive an advance as if they did have 10 MKs (i.e., NIS 11.2m), if they put up a bank guarantee for the difference between that amount and the sum that they are entitled to.
Parties and lists with no MKs are not automatically entitled to an advance. They can receive an advance equivalent to 10 MKs, however (under an amendment passed right before the Knesset was dissolved; previously they could receive only 70% of 10 funding units)—NIS 16m, if they post a back guarantee for that sum.
It is important to stress that these advances are not a “gift”: the parties have to pay them back after the election.
If they win seats in the Knesset, the advances are paid back from their election campaign funding; and if this falls short, from their regular monthly funding from the State treasury.
If they do not make it into the Knesset, the bank guarantee is forfeited. In the past this was the fate of Yahad (2015) and of the New Right and Gesher (in the first election in 2019).
If the party does not put up a bank guarantee (because it was represented in the outgoing Knesset) and fails to clear the threshold, it is obligated to repay the advance, which can be deducted from any sum to which it is legally entitled. The Knesset speaker is supposed to notify the Interior, Finance, and Justice ministers of the existence of such a debt.
The Funding Mechanism Discriminates against New Parties
As can be seen, the mechanism for advances discriminates against new parties that currently are not represented in the Knesset. Whereas parties that are already represented automatically receive millions of shekels for their campaigns, new parties must obtain a bank guarantee (or donations). Among new parties, this is particularly difficult for those that do not have rich supporters and consequently find it hard to obtain large bank guarantees.
On the other hand, obviously the State cannot hand out advances automatically, without guarantees or securities, to any party that wants to run, both because of the expense (advances to new parties that don’t clear the threshold are unlikely to ever be repaid, and because that would encourage many groups without a prayer of winning Knesset seats to run. It does provide automatic advances to parties that already have MKs, but there is a good reason for this: veteran parties are likely to be re-elected and will be able to repay their advances with their State party funding.
A possible solution is a matching funds mechanism, as exists in Germany. It could be stipulated that any new party that is able to raise a certain sum from donors (say, a million shekels) will receive an advance of the same size from the state treasury without having to post a bank guarantee. Such a party has demonstrated that it has a presence on the ground and a significant constituency of supporters. It is a serious party that has at least a chance of clearing the threshold, and in any case deserves help so it can make a valiant effort to persuade enough voters to support it (just as the State assists existing parties).
Another disadvantage of the current system is that it can encourage cronyism, in that wealthy individuals have an incentive to put up large guarantees for new parties (especially those with a reasonable chance of making it into the Knesset). Here it is important to note that Israel has set fairly strict limits on campaign contributions (in an election year, no more than NIS 2,400 to a party represented in the Knesset, and up to NIS 12,000 for one that is not). But there is no limit on how large a sum a private individual can guarantee for a party; in fact, in the past, tycoons have posted guarantees in the millions for new parties such as Yesh Atid, Kulanu, and Blue-White. Some thought should be given to placing a cap on the size of such guarantees. It mustn’t be too low, of course, and make it difficult for new parties to raise a significant guarantee (required, as noted, for receiving an advance); but there is no doubt that the situation in a which a single individual can put up millions of shekels for a new party is unreasonable.